Drove an F30 328i for an extended period of time over the course of 3 days. Awesome on the highway. Awesome around town. You wouldn't really know it was a turbo 4. Great car. However the same problems/issues that a e90 328i/330i have. In it's base form it's a little boring. Not inspiring drive. However this has been the case back to the E36. All the base cars from E36 onward have been just a little more boring with each chassis. A stock E30 325i/S is a fun to drive car. You are connected to the driving.

But the M3/M5/Etc always put huge smiles on the face. So I don't think they lost their way. It is very similar with Porsche. Everyone said Porsche died when they made an SUV. It's cars like that that allows Porsche to make GT3s, Turbo 911s and the like. Without mainstream car sales(like X5, 328i and X1) they can't afford to sell cars or develop cars like the M3.

And not sure how everyone thinks the quality is going down. Ever been in the E46/E53/Z4 generation of cars? E36 had their problems and so do other BMWs. But by 50,000 miles the plastic painted surfaces would be literally peeling off. Around the door pulls. Around the window switches. And the door surround/weather sealing just drops as well on the E46. They had plenty of issues with those.

Still think the single best car BMW built is the E39 M5. It has it's E39 chassis problems bur if I could have one car only. E39 M5. Followed by E36 M3 Sedan.

As to the 'horsepower' war. That is on it's way out. The E36 M3 has 240hp in US trim. And it is more fun to drive than ANY new Non-M BMW 3-Series. The E30 325iS had 168hp downhill behind a semi on a good day. And it too is more fun to drive than any new Non-M BMW 3-Series. Horsepower is not the name of the game anymore. Sure a new Accord has 320HP or whatever out of it's FWD V6... but driving one? No thanks. I'd rather have a 190hp 2.8L I6 from BMW.

QFT

I find the F30 makes a different impression just from going to base-sport-MSport, let alone moving up to an M3. But I think as you said, that has always been the case.